U.S. DHHS OIG and DOJ Health Care Fraud Prevention Enforcement Team

8/14/2019 U.S. DHHS OIG and DOJ Health Care Fraud Prevention Enforcement Team

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Testimony before the House Energy and Commerce CommitteeSubcommittee on Health

U.S. House of Representatives

"Health Care Reform:Opportunities to Address Waste,Fraud and Abuse"

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Testimony of Daniel R. LevinsonInspector General

June 25, 20099:30 a.m.2123 Rayburn House Office Building

~t-'t ~AUlV'C~S'UJ''f4,~ ~.l t:'"'1''Jy.l~Daniel R. Levinson, Inspector GeneralDepartment of Health and Human Services


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Testimony of:Daniel R. LevinsonInspector GeneralOffice ofInspector General, u.s. Department of Health and Human Services

COMBATING FRAUD, WASTE, AND ABUSE IN FEDERAL HEALTH CAREPROGRAMSINTRODUCTIONGood morning Chairman Pallone, Ranking Member Deal, and distinguished members of theSubcommittee. I am Daniel Levinson, Inspector General of the U.S. Department of Health andHuman Services (HHS). In the context of current discussions about health care reform, it iscritical that the Governent pursue a comprehensive strategy to combat fraud, waste, and abuseto ensure that Federal health care programs remain solvent and best serve the needs ofbeneficiaries. I thank you for the opportnity to discuss the Office ofInspector General's (OIG)work in this area.OIG has devoted considerable resources toward fighting fraud, waste, and abuse involvingHHS's Federal health care programs. We have performed evaluations, investigations, and auditson a wide variety of issues, including fraudulent activity by health care providers; excessivepayments for medical services, equipment, and prescription drugs; and financial conflicts ofinterests within the institutions charged with protecting the health of the American public.Through this work, we have helped identify and recover bilions of dollars in fraudulent, abusive,or wasteful payments and also raised awareness of these critical issues among policy makers,governent agencies, and the health care community at large. We have recommendedimprovements to program safeguards and payment methodologies to prevent fraud, waste, andabuse and to ensure health care quality and beneficiary safety. We have also reached out to thehealth care community to promote compliance. Moving forward, OIG is committed to buildingon our successes and achieving even greater results in protecting the integrty of governenthealth care programs and the health and welfare of people served by them.In my testimony this morning, I wil begin by describing OIG's unique role in combating fraud,waste, and abuse in Medicare and Medicaid. I then wil provide an overview of vulnerabilities inthese programs and discuss current initiatives that expand our efforts to identify, investigate, andprosecute health care fraud. Finally, I wil discuss OIG's "Five Principles" strategy forcombating fraud, waste, and abuse, which we believe are applicable to any health care program.OIG's ROLE AND PARTNERS IN COMBATING FRAUD, WASTE, AND ABUSE

OIG is an independent, nonpartisan agency committed to protecting the integrty ofthe morethan 300 programs administered by HHS. OIG's mandate is to protect the integrty of theprograms ofHHS, as well as the health and welfare of the beneficiaries of those programs.Thans to the work of our 1,500 employees and our law enforcement partners, from FY 2006through fiscal year (FY) 2008, OIG's investigative receivables averaged $2 bilion per year andTestimony before the House Committee on Energy and Commerce, Subcommittee on HealthJune 25, 2009 1


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our audit disallowances resulting from Medicare and Medicaid oversight averaged $1 bilion peryear. The result was a Medicare- and Medicaid-specific return on investment of $17 to $ 1 forOIG oversight. In addition, in FY 2008, implemented OIG recommendations resulted in $16bilion in savings and funds put to better use.Further, as reflected in OIG's Semiannual Report to Congress released earlier this month, OIG'sexpected recoveries for the period of October 2008 through March 2009 include $274.8 milionin audit disallowances and $2.2 bilion in investigative receivables, which includes nearly $552milion in non-HHS receivables resulting from OIG work (e.g., the States' share of Medicaidrestitution).It comes as no surprise that the large Federal Governent expenditures on health care programsattract individuals and entities seeking to exploit the health care system for their own financialgain. The National Health Care Anti-Fraud Association estimates conservatively that at least 3percent of health care spending is lost to fraud. In FY 2009, Medicare is expected to cover anestimated 45.5 millon beneficiaries at a total cost of$486 bilion to the Federal Governent andMedicaid is expected to cover an estimated 51 milion beneficiaries and cost the FederalGovernent over $217 bilion. Though the vast majority of health care providers and suppliersare honest and well intended, even a small percentage of providers and suppliers intent ondefrauding the programs can have significant detrimental effects. Although it is not possible tomeasure precisely the extent of fraud in Medicare and Medicaid, virtally everyhere we lookOIG continues to find fraud, waste, and abuse in these programs. Therefore, OIG works closelywith HHS officials, the Department of Justice (DOJ), other agencies in the Executive Branch,Congress, and States to bring about systemic changes in program operations, successfulprosecutions, negotiated settlements, and recovery of funds.Collaboration and innovation are essential in the fight against fraud. On May 20, 2009, HHSSecretary Kathleen Sebelius and Attorney General Eric Holder announced a new initiative tomarshal significant resources across the Governent to prevent health care waste, fraud, andabuse; crack down on fraud perpetrators; and enhance existing partnerships between HHS andDOJ to reduce fraud and rcover taxpayer dollars. To further this effort, the Secretary andAttorney General created the Health Care Fraud Prevention and Enforcement Action Team(HEAT) joint task force consisting of senior level leadership from both departments. Amongother activities, HEAT is building on the successful OIG-DOJ Medicare Fraud Strike Forceinitiated in south Florida, discussed in greater detail later, by expanding Strike Forces to othermetropolitan areas across the country. These Strike Forces use advanced data analysistechniques to identify criminals operating as health care providers and detect emerging ormigrating fraud schemes. HEAT is also focusing on prevention strategies to combat health carefraud. For example, HEAT wil expand a Centers for Medicare and Medicaid Services (CMS)demonstration project in south Florida that uses site visits to potential durable medical equipment(DME) suppliers to ensure that applicants are legitimate businesses, not criminals. HEAT alsoplans to enlist health care providers in the fight against fraud by increasing training aboutprogram requirements and effective compliance measures that help ensure integrty of bilingpractices.Strike Force activities are one part of the Governent's enforcement efforts; OIG also workswith our law enforcement partners to pursue other criminal cases as well as civil and

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administrative cases. In FY 2008, OIG investigations resulted in 455 criminal actions againstindividuals or entities that engaged in crimes against departental programs and 337 civil andadministrative actions, which included False Claims Act and unjust enrchment lawsuits filed inFederal district court, Civil Monetary Penalties Law settlements, and administrative recoveries'related to provider self-disclosure matters. Also in FY 2008, OIG excluded from the Federalhealth care programs 3,129 individuals and entities for fraud or abuse that affected Federal healthcare programs and/or beneficiares.The collaborative antifraud efforts of HHS and DOJ are rooted in the Health InsurancePortability and Accountability Act of 1996, P. L. No. 104-191 (HIPAA), which directed theSecretary ofHHS, acting through OIG and the Attorney General, to promulgate a joint HealthCare Fraud and Abuse Control (HCF AC) Program. The HCF AC Program and Guidelines wentinto effect on January 1, 1997. HIP AA requires HHS and DOJ to report annually to Congress onHCF AC Program results and accomplishments. HCF AC activities are supported by a dedicatedfunding stream within the Hospital Insurance Trust Fund.In its 11 th year of operation, the HCF AC continues to demonstrate the success of a collaborativeapproach to identify and prosecute health care fraud, prevent future fraud and abuse, and protectMedicare and Medicaid beneficiaries. Since its inception, HCF AC activities have returned over$11.2 bilion to the Medicare Trust Fund. As I wil discuss, the Goverent's efforts to addressDME and infusion fraud in south Florida ilustrate the benefits of a collaborative approach.Although I wil highlight efforts focused on DME and infusion fraud in particular geographic hotspots, fraud, waste, and abuse occur among all types of health care providers and suppliers andcan affect all types of services covered by Medicare and Medicaid in all geographic areas.VULNERABILITIES IN FEDERAL HEALTH CARE PROGRASStrike Force Activities Have Uncovered Numerous Program VulnerabiltiesOIG and our law enforcement partners are focusing antifraud efforts in geographic areas at highrisk for Medicare fraud. In 2007, OIG and DOJ launched a Strike Force effort in south Floridaconsisting of staff from OIG, DOJ, the U.S. Attorney's Office for the Southern District ofFlorida, the Federal Bureau ofInvestigation (FBI), and CMS to identify, investigate, andprosecute DME suppliers and infusion clinics suspected of Medicare fraud. Building on thesuccess in south Florida, the Strike Force was expanded to Los Angeles in March 2008 and toHouston and Detroit in May 2009 in connection with the HEAT initiative.The Strike Force model has proven highly successfuL. To date, the south Florida Strike Forcehas opened 161 cases, convicted 151 of its targets, and secured $187 milion in criminal fines

. and civil recoveries. In addition to prosecuting criminals and recovering funds for the MedicareTrust Fund, the south Florida Strike Force has had a powerful sentinel effect. Medicare claimsdata show that during the first 12 months of the Strike Force (March 1,2007, to February 29,2008), claim amounts submitted for DME in south Florida decreased by 63 percent to just over$1 bilion from nearly $2.76 bilion during the preceding 12 months.



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In March 2008, DOJ and OIG established a second Strike Force in Los Angeles. Sinceoperations began, the Los Angeles Strike Force has opened 48 cases and is targeting individualsand organizations that have submitted fraudulent claims to the Medicare program. The schemesinclude false claims for wheelchairs, orthotics, and other DME that was medically unnecessaryand/or was not provided to the beneficiaries identified in claims.The recent Strike Force investigation and prosecution of Medcore Group LLC (Medcore) andM&P Group of South Florida (M&P) ilustrate key vulnerabilities in the Medicare program.Medcore and M&P operated as Miami-based HIV clinics from approximately 2004 through2006, biled approximately $5.3 milion to the Medicare program, and received payments ofmore $2.5 millon. From their inception, Medcore and M&P were set up as criminal enterprisesdesigned to defraud Medicare. The scheme was to submit claims for medically unnecessary HIVinfusion and injection treatments. The three owners of Medcore and M&P included a former gasstation attendant, a trained cosmetologist, and an individual currently incarcerated for Medicarefraud involving a separate DME company he operated from 2001 to 2003. None had a medicalbackground.At trial, one of Medcore's owners, Tony Marrero, testified that the scheme was so profitable soquickly that he became concerned about getting caught and decided to set up a second fraudulentclinic, M&P, in the name of his wife. M&P was located in the same building as Medcore, hadthe same employees, submitted claims under the Medicare provider number of the samephysician, and submitted claims on behalf of six of the same patients. In fact, the same physicianwas associated with other Miami-area infusion clinics, which biled Medicare for more than$60 milion between 2004 and the end of2005.Mr. Marerro also testified at trial that he had an arrangement with a pharmaceutical wholesalecompany to buy invoices that showed the purchase oflarge amounts of medications, when onlysmall amounts were actually purchased. One ofthe medical assistants testified that shemanipulated the patients' blood samples to ensure that laboratory results would appear to supportthe Medicare claims.Like many infusion fraud schemes, Medcore and M&P gained the cooperation of patients bygiving them kickbacks of up to $200 per visit. Four patients testified that they took kickbacksand never received any medication at the clinics. One patient testified that he used his paymentsfrom the clinics to support his cocaine addiction. Another patient testified that he did not haveHIV, even though the clinics' documents showed that he was being infused with medication totreat HIV. By the patients' own admission, they had been receiving kickbacks from numerousMiami clinics for many years. On March 17,2009, a Federal jury in Miami convicted twophysicians and two medical assistants who worked for Medcore and M&P in connection with thefraud scheme. The Governent obtained 6 pleas before trial, resulting in 10 convictions in total.OIG's fraud-fighting efforts in south Florida also draw on the expertise of our auditors andevaluators. For example, OIG identified weaknesses in Medicare's supplier enrollment processand its supplier oversight activities. In 2006, OIG conducted unannounced site visits to1,581 DME suppliers in south Florida and found that 31 percent, i.e., 491 suppliers, did notmaintain physical facilities or were not open and staffed during business hours, contrary toTestimony before the House Committee on Energy and Commerce, Subcommittee on HealthJune 25,2009 4


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Medicare requirements. The 491 suppliers were referred to CMS so that CMS could considerrevoking their biling privileges, which it subsequently did. Biling privileges were reinstated byhearing offcers for 222 of the 243 suppliers who appealed. Subsequently, 74 percent ofthesuppliers whose billng privileges were reinstated by hearing officers (165 of222) had theirprivileges revoked again or inactivated by CMS. Between April and September 2007, the U.S.Attorney's Office indicted 18 individuals connected to 15 of the 222 reinstated suppliers. As ofApril 2008, 10 of the 18 individuals had been convicted, sentenced to jail terms, and ordered topay restitution. Six of the eight remaining individuals have since been sentenced to jail termsand ordered to pay restitution. Two of the eight individuals are currently fugitives. OIG's workdemonstrates how important it is to strengthen the enrollment screening process and improveprogram safeguards.As a further result of OIG' s work in south Florida, our analysis of Medicare biling patterns forinhalation drugs used with DME has uncovered evidence of abusive biling. Despite CMS'sefforts to address inappropriate payments, problems persist. For example, in 2007, Medicarepaid almost $143 milion for inhalation drugs in Miami-Dade County alone-an amount 20times greater than the amount paid in Cook County, Ilinois, the county (outside south Florida)with the next highest total payments. However, according to Medicare enrollment data, CookCounty is home to almost twice as many Medicare beneficiaries as Miami-Dade County.Medicare's average per-beneficiary spending on inhalation drugs was five times higher in southFlorida than in the rest of the country. Further, 75 percent of south Florida beneficiaries whoreceived a particular inhalation drug, budesonide, had Medicare-paid claims that exceededMedicare utilization guidelines, compared to 14 percent of beneficiaries in the rest of thecountry. For 62 percent of south Florida inhalation drug claims, the beneficiaries on these claimsdid not have a Medicare-biled office visit or other service in the past 3 years with the physicianwho reportedly prescribed the drug. Finally, 10 south Florida physicians were each listed as theordering physician on more than $3.3 milion in submitted inhalation drug claims in 2007, or anaverage of$12,000 per day.Similarly, OIG found that CMS has had limited success controlling aberrant biling by infusionclinics. In the second half of 2006, claims originating in three south Florida counties accountedfor 79 percent ofthe amount submitted to Medicare nationally for drug claims involvingHIV/AIDS patients and constituted 37 percent of the total amount Medicare paid for services forbeneficiaries with HIV/AIDS. However, only 10 percent of Medicare beneficiares withHIV/AIDS lived in these three counties.Other Program VulnerabiltiesAs part of its core mission, OIG identifies vulnerabilities that put programs and beneficiaries atrisk and makes recommendations to address these vulnerabilities. OIG reviews have identifiedpayments for unallowable services, improper coding, and other types of improper payments.Improper payments range from reimbursement for services not adequately documented andinadvertent mistakes to payments that result from outright fraud and abuse. We have identifiedprogram integrty risks and vulnerabilities in every part of Medicare, as well as Medicaid.These vulnerabilities affect services ranging from inpatient hospital and skiled nursing services



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In a report released this month, OIG estimated that New York State improperly claimed over$275 milion in Federal Medicaid reimbursement during our January 1, 2004, through December31,2006, audit period for personal care services from providers in New York City that did notmeet coverage requirements. These improper payments occurred because the State did notadequately monitor New York City's personal care services program for compliance with certainFederal and State requirements. In addition, we identified quality and safety concerns. Cases arebeing pursued involving allegations that beneficiaries were physically abused by personal careaides, and their property was stolen. In addition, we have investigated complaints frombeneficiaries that aides have abandoned them.Prescription DrugsOIG has an extensive body of work identifying fraud, waste, and abuse related to prescriptiondrug coverage under Medicaid, Medicare Part B, and Medicare Part D. Fraud concerns includepharmaceutical companies misreporting pricing information that is used as the basis ofreimbursement and/or Medicaid rebates; ilegal marketing tactics, including kickbacks and off-label/off-compendium promotion; pharmacies switching drugs to maximize reimbursement; anddrug diversion. OIG also is concerned that Medicaid reimbursement for prescription drugs,particularly generic drugs, does not accurately reflect drug costs. For Medicare Part D, OIG hasidentified vulnerabilities related to sponsors' bids and the resulting payments and premiums toplan sponsors, as well as deficiencies in Part D integrty safeguards.Medicaid-specific Services

Medicare and Medicaid share many of the same vulnerabilities, including DME, home health,and prescription drugs. Medicaid-specific vulnerabilities include improper payments for school-based health services, case management services, and disproportionate share hospital payments.For example, in 2006, OIG found that a State Medicaid agency claimed Federal Medicaidfunding totaling $86 milion for unallowable targeted case management services. In a series ofreviews in several States, OIG consistently found that schools had not adequately supported theirMedicaid claims for school-based health services and identified almost a bilion dollars inimproper Medicaid payments.

Other Outpatient Services

OIG also continues to identify vulnerabilities related to certain types of services provided byphysicians and other health professionals, including services related to advanced imaging, painmanagement, mental health services, clinical labs, and transportation services. For example,OIG found that from 1995 to 2005, advanced imaging paid under the Medicare Physician FeeSchedule grew more than fourfold, from 1.4 milion to 6.2 milion services. Allowed chargesand utilization rate per beneficiary grew by a similar magnitude, to $3.5 bilion and 163 servicesper 1,000 beneficiares. Services provided by independent diagnostic testing facilities (IDTF)accounted for nearly 30 percent of this growth. OIG work has found problems with IDTFs,including noncompliance with Medicare requirements and biling for services that were notreasonable and necessary.

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Inpatient ServicesExpenditures for inpatient services, including those provided by inpatient hospitals and skilednursing facilities, account for one-third of all Medicare expenditures. Problems identified byOIG include hospitals taking advantage of enhanced payments by improperly manipulatingbiling; hospitals reporting inaccurate wage data, which affects future Medicare payments;inpatient facilities that may be gaming prospective payment reimbursement systems bydischarging or transferrng patients to other facilities for financial rather than clinical reasons;and kickback schemes.

OIG RecommendationsIn addition to pursuing those who violate the law, we also alert program administrators and otherdepartmental officials to problems and offer solutions. These recommendations for correctiveaction are found in OIG's audit and evaluation reports, management implication reports resultingfrom OIG's investigative work, and other communications. In 2008, implemented OIGrecommendations resulted in an estimated $16 bilion in program savings and fuds put to betteruse. In addition, OIG recommendations have resulted in substantial improvements in efficiency,effectiveness, and quality, as well as fraud prevention, whose impacts are more difficult toquantify.To preserve its independence and objectivity, OIG is not authorized to implement or operate theHHS programs it oversees, nor can OIG compel the Department to implement ourrecommendations. However, we take several steps to follow up with program offcials on thestatus of OIG recommendations and to encourage actions to address the vulnerabilities that wehave identified. For example, the Principal Deputy Inspector General and I meet regularly withthe CMS Administrator and other senior CMS officials to discuss unimplementedrecommendations and other program integrity concerns. OIG is implementing a newrecommendations management system that wil further enhance our ability to track and followup on OIG recommendations.Each year we issue a Compendium of Unimplemented OIG Recommendations. TheCompendium consolidates significant unimplemented monetary and nonmonetaryrecommendations addressed to the Department that we expect would, if adopted, result in costsavings, improved program integrty, and/or greater program efficiencies. Theserecommendations require legislative, regulatory, and/or administrative action. Whileimplementation of monetary recommendations would have fiscal impacts, implementation ofnonmonetary recommendations would improve program operations in other ways. In somecases, the agency agrees with our recommendations but has not yet fully implemented them; inothers, the agency disagrees with our recommendations.OIG's unimplemented recommendations provide a useful roadmap for focusing efforts tosafeguard and improve the efficiency and effectiveness ofthe HHS programs OIG oversees.However, it is difficult to draw conclusions about overall savings from these recommendations.Estimates of potential monetary benefits listed in the Compendium are unique to eachrecommendation and are not comparable. These are typically point-in-time estimates and areoften specific to the scope and timing ofOIG's underlying work. When OIG reportsTestimony before the House Committee on Energy and Commerce, Subcommittee on HealthJune 25, 2009 8


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implemented recommendations and resulting savings in our Semiannual Reports to Congress, wetypically rely on savings estimates produced by the Congressional Budget Offce (CBO) or otherHHS sources. However, with respect to unimplemented recommendations, CBO or othersources for scoring potential savings frequently are not available. Therefore, OIG may usefindings from our reports or other sources, as available, to estimate potential savings. Several ofour recommendations that we expect would produce savings do not include estimates of thosesavings. Notwithstanding the limitations in estimating potential savings, the Compendium is animportant tool for identifying program vulnerabilities and improvements.ENSURING THE INTEGRITY OF FEDERAL HEALTH CARE PROGRAMSOIG's Five-Principle Strategy to Combat Health Care Fraud, Waste, and AbuseFor Federal health care programs to best serve beneficiaries and remain solvent for futuregenerations, the Governent must pursue a comprehensive strategy to prevent, detect andremediate fraud, waste, and abuse. Based on OIG's extensive experience in combating healthcare fraud, waste, and abuse, we have identified the following five principles that we believeshould guide the development of any national health care integrty strategy.1. Enrollment - Scrutinize individuals and entities that want to participate as providers andsuppliers prior to their enrollment in health care programs.2. Payment - Establish payment methodologies that are reasonable and responsive to changesin the marketplace.3. Compliance - Assist health care providers and suppliers in adopting practices that promotecompliance with program requirements, including quality and safety standards.4. Oversight - Vigilantly monitor programs for evidence of fraud, waste, and abuse.

5. Response - Respond swifty to detected fraud, impose sufficient punishment to deter others,and promptly remedy program vulnerabilties.We believe that these principles provide a useful framework for designing and implementingprogram benefits and integrty safeguards. Consistent with these principles, OIG offers thefollowing recommendations to strengthen the integrty of Federal health care programs.EnrollmentScrutinize individuals and entities that want to participate as providers and suppliers prior to theirenrollment in health care programs.Medicare and Medicaid provider enrollment standards and screening should be strengthened,making participation in Federal health care programs as a provider or supplier a privilege, not aright. It is more efficient and effective to protect the programs and beneficiaries fromunqualified, fraudulent, or abusive providers and suppliers up front than to try to recover



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payments or redress fraud or abuse after it occurs. Greater transparency in the enrollmentprocess wil help the Governent know with whom it is doing business.For example, as the Medcore and M&P case described above demonstrates, a lack of effectivescreening measures gives dishonest and unethical individuals access to a system they can easilyexploit. Even after Medcore had biled Medicare for $4 milion in fraudulent claims, it was easyfor the clinic's owner to obtain a provider number in his wife's name for a second clinic, M&P,operating in the same building as Medcore, with the same medical director, employees, andpatients. One of the owners, Mr. Marrero, testified that when he ultimately sold M&P for$100,000 in cash, he went to a lawyer's office so the lawyer could fill out paperwork to putownership of the clinic in the name of two nominee owners. The sale was structured as a stocksale so that the new "owners" would have 90 days to notify Medicare of the change inownership, allowing a window of time for the fraud to continue under new "ownership." In ourexperience, it is too easy for unscrupulous individuals to recruit nominee owners of fraudulentcompanies.Providers and suppliers applying for enrollment in Medicare or Medicaid should be screenedbefore they are granted biling privileges. Heightened screening measures for high-risk itemsand services could include requiring providers to meet accreditation standards, requiring proof ofbusiness integrty or surety bonds, periodic recertification and onsite verification that conditionsof participation have been met, and full disclosure of ownership and control interests. The costof this screening could be covered by charging application fees. New providers and suppliersshould also be subject to a provisional period during which they are subject to enhancedoversight, such as prepayment review and payment caps.PaymentEstablish payment methodologies that are reasonable and responsive to changes in themarketplace.We support efforts to pay appropriately for the items and services covered by Federal health careprograms. Medicare and Medicaid payments should be suffcient to ensure access to carewithout wasteful overspending. Payment methodologies should also be responsive to changes inthe marketplace, medical practice, and technology. Although CMS has the authority to makecertain adjustments to fee schedules and other payment methodologies, for some changes,congressional action is needed.010 has conducted extensive reviews of Medicare and Medicaid payment methodologies andhas determined that the programs pay too much for certain items and services. As OIG's reviewsof home oxygen equipment and wound therapy pump paymeiits demonstrate, whenreimbursement methodologies do not respond effectively to changes in the marketplace, theprogram and its beneficiaries bear the cost. As the experience of south Florida ilustrates,excessive payments also are a lucrative target for criminals. These criminals can reinvest someof their profit in kickbacks for additional referrals, thus using the program's funds to perpetuatethe fraud scheme.



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All payment methodologies create incentives and fraud risks that should be identified andaddressed. For example, fee-for-service payments create financial incentives to maximize thenumber and complexity of services provided, even when such services are not medicallynecessary. Conversely, under a fixed, prospective payment system, financial incentivesencourage fewer services and patients may not receive all of the care that they need and forwhich the program is paying. In considering any payment structure, it is imperative to identifythe incentives that it creates and associated risks and to implement necessary safeguards toremediate the negative incentives and reduce fraud risks.ComplianceAssist health care providers and suppliers in adopting practices that promote compliance withprogram requirements.Health care providers and suppliers must be our partners in ensuring the integrty of Federalhealth care programs and should adopt internal controls and other measures that promotecompliance and help prevent, detect, and respond to health care fraud, waste, and abuse. To thisend, OIG has published on its Website extensive resources to assist industry stakeholders inunderstanding the fraud and abuse laws and designing and implementing effective complianceprograms. These resources include sector-specific Compliance Program Guidance that describesthe elements of an effective compliance program and identifies risk areas, advisory opinions, andfraud alerts and bulletins.In many sectors of the health care industry, such as hospitals, compliance programs arewidespread and often very sophisticated; other sectors have been slower to adopt internalcompliance practices. Compliance programs not only benefit the Federal health care programs;they also benefit industry stakeholders by improving their business practices, by fostering earlydetection and correction of emerging problems, and by reducing the risk that they wil becomethe subject of a whistleblower complaint or fraud prosecution.States also have begun to recognize the value of compliance systems. For example, New Yorknow requires providers and suppliers to implement an effective compliance program as acondition of participation in its Medicaid program. Medicare Part D also requires thatprescription drug plan sponsors have compliance plans that address certain required elements.Although compliance programs do not guarantee reduced fraud and abuse, they are an importantcomponent of a comprehensive governent-industry partnership to promote program integrty.We advocate that providers and suppliers be required to adopt compliance programs as acondition of participating in the Medicare and Medicaid programs. Further, the obligation ofproviders and suppliers to repay overpayments they discover through compliance efforts orotherwise should be made explicit in the statute. There should be no question that providers andsuppliers must return taxpayer dollars they should not have received in the first place.



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OversightVigilantly monitor the programs for evidence of fraud, waste, and abuse.As fraud schemes become more sophisticated and migratory, access to real time data and the useof advanced data analysis to monitor claims and provider characteristics are critically important.OIG is using innovative technology to detect and deter fraud, and we continue to develop andimplement cutting edge initiatives to enhance our technology infrastructure and support a data-driven antifraud approach. More must be done to nsure that agencies governentwide are ableto use 21 st century information technology effectively in the fight against health care fraud.This data-driven approach should underpin the development of fraud enforcement andprevention activities. The health care system compiles an enormous amount of data on patients,providers, and the delivery of health care items and services. However, Federal health careprograms often fail to use claims-processing edits and other information technology effectivelyto identify improper claims before they are paid and to uncover fraud schemes. For example,Medicare should not pay a clinic for HIV infusion when the beneficiary has not been diagnosedwith the ilness, pay twice for the same service, or process claims that rely on the provideridentifiers of deceased physicians. Better collection, monitoring, and coordination of data wouldallow Medicare and Medicaid to detect these problems earlier and avoid making improperpayments. Moreover, effective use of data would enhance the Governent's abilty to detect andrespond to fraud schemes more quickly.Needed improvements in program oversight include real-time access to data for lawenforcement; uniform, comprehensive data elements; more timely collection and validation ofdata; robust reporting of data by States and others; interoperability of systems; consistent dataextraction methods; and the ability to draw and analyze claims and provider data acrossMedicare Parts A, B, C, D, and Medicaid. CMS is building an Integrated Data Repository (IDR)that wil, when completed, contain a wealth of data across several programs. Although thesystem is stil under development, the prospect of such a comprehensive data warehouse holdsconsiderable promise for detecting and preventing fraud and abuse.In addition, we advocate the consolidation and expansion of the various provider databases,including the Health Care Integrty and Protection Data Bank (HIPDB), the National PractitionerData Bank (NPDB), and OIG's List of Excluded Individuals/Entities (LEIE). Providing acentralized, comprehensive, and public database of adverse actions and other sanctions --including a national registry of patient abuse and neglect -- would be an effective means ofpreventing providers and suppliers with problem backgrounds from moving from State to Stateunnoticed by licensing, governent, and health plan officials.



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ResponseRespond swifty to detected fraud, impose suffcient punishment to deter others, and promptlyremedy program vulnerabilities.To ensure the integrty of Federal health programs, law enforcement is working to accelerate theGovernent's response to fraud schemes by reducing the time needed to detect, investigate, andprosecute fraud. The Governent's Strike Force model has proven highly successful in thisregard, and although resource intensive, is a powerful antifraud tool and represents a tremendousreturn on investment. In addition to prosecuting criminals and recovering funds for the MedicareTrust Fund, the Strike Forces have had a strong sentinel effect, as evidenced by the 63 percentdecrease in DME claims submitted in south Florida over the first 12 months of Strike Forceoperations there.Even the best antifraud efforts are ineffective if fraud is not promptly detected and, oncedetected, promptly punished and deterred. For example, our investigations have found evidenceof an increase in organized crime in health care. Health care fraud is attractive to organizedcrime because the penalties are lower than those for other organized-crime-related offenses (e.g.,offenses related to ilegal drugs); there are low barrers to entry (e.g., a criminal can easily obtaina supplier number, gather some beneficiary numbers, and bil the program); schemes are easilyreplicated; and detection efforts often are hampered by lack of access to real-time data. We needto alter the cost-benefit analysis by increasing the risk of swift detection and the certainty ofpunishment.In addition, it is currently diffcult to stop the flow of Medicare dollars to criminals who areunder investigation for known health care fraud schemes. An explicit payment suspensJonauthority would enable Medicare to keep taxpayer dollars out of the pockets of criminals in caseswhere the Governent has credible evidence of fraud. These criminals often take the money anddisappear before the Governent can complete an investigation and prosecute them. An explicitpayment suspension authority is a critical, money-saving tool in these situations.OIG currently uses a range of administrative sanctions, including civil monetary penalties (CMP)and program exclusions, as an adjunct to criminal and civil enforcement. However, OIG hasidentified a number of enhancements to these administrative authorities that would increase ourabilty to address emerging schemes, such as authorizing CMPs for false provider enrollmentapplications and for the ordering or prescribing of items or services by an excluded entity.Amending the law to align our CMP authorities with the recent False Claims Act amendmentswould also be helpfuL.In addition, in the course of our investigations, audits, and evaluations, OIG often identifiesprogram vulnerabilities that have been or could be exploited and recommends corrective actions.Program administrators and policy makers have important roles in responding quickly to addressthese vulnerabilities and reduce the risk of future fraud, waste, and abuse.



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CONCLUSIONIn conclusion, in the context of health care reform, it is an especially important time to considerhow to best safeguard health care programs from fraud, waste, and abuse to protect beneficiariesand taxpayer dollars. OIG's mission is to protect the integrty ofHHS programs, including theMedicare and Medicaid programs, and the well-being of program beneficiaries. In fulfillng ourmission, OIG has identified tor recovery bilions of dollars lost to fraud, waste, and abuse;helped remove thousands of fraudulent providers from Federal health care programs; pinpointednumerous items and services for which the Governent is substantially overpaying; andrecommended actions to better protect programs and beneficiaries. These experiences andresults have applicability to the current discussions of health care reform. It is critical that theGovernent pursue a comprehensive strategy to combat fraud, waste, and abuse. We believethat our "Five Principles" strategy provides the framework to identify new ways to protect theintegrty of the programs, meet the needs of beneficiaries, and keep Federal health care programssolvent for future generations. We look forward to working with the Committee on these issues,including providing you with information and technical assistance. This concludes mytestimony, and I would be pleased to answer any questions.

Testimony before the House Committee on Energy and Commerce, Subcommittee on HealthJune 25, 2009

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Documents

U.S. DHHS OIG and DOJ Health Care Fraud Prevention Enforcement Team